Articles - Archived Money Matters

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Navigating Social Security Options

As you near 60, it's important to start thinking about your Social Security options, when you want to begin taking withdrawals, and the potential tax obligations. Here are some key pieces to get you started.

Full Benefits

Currently, normal benefits begin between the ages of 65 and 67. Review your annual Social Security statement for your estimated benefit and retirement age.

Early Benefits

If you elect to take early benefits, you'll be subject to income limits. In the years before you reach your full benefit age, your benefit will be reduced by $1 for every $2 you earn over $14,160. In the year you reach your normal benefit age, the benefit will be reduced by $1 for every $3 you earn over $37,680. It is important to be aware of these limits since your Social Security benefit will be reduced.

Delayed Benefits

Another option you have is to delay when you begin receiving benefits. Most Social Security recipients will get an 8 percent annual benefit increase each year they choose to delay Social Security until age 70. This can be a helpful option to boost retirement income, but it will be important to factor in your life expectancy.

Taxes

Depending on your combined income and tax filing status, a portion of your Social Security benefits may be taxable. The chart below shows the 2011 combined income ranges that trigger taxable benefits.



Filing Status Up to 50% of benefits taxed Up to 85% of benefits taxed
Individual $25,000 - $34,000 Over $34,000
Married $32,000 - $44,000 Over $44,000

Combined income: Adjusted Gross Income + Nontaxable Interest (if applicable) + ½ of your Social Security benefit

If your Social Security benefits will be taxable, you can set up federal withholdings from your monthly payments, or you'll need to make estimated quarterly tax payments.

Navigating Social Security can seem like a confusing process, but it doesn't have to be. Take time to research your options and set up an appointment at your local Social Security office to find the best option for you.